Dairy, sugarcane farmers welcome scrapping of levies, say more needs to be done

Dairy farmers across the country have something to smile about after the government scrapped taxes on raw materials used to manufacture animal feeds.

In his Budget speech in the National Assembly on Wednesday, Treasury Cabinet Secretary Henry Rotich said the government would exempt from value-added tax (VAT) all raw materials used in manufacture of animal feeds.

Initially, only animal feeds were exempted from the tax even as the raw materials continued to attract heavy levies. Thus, dairy farmers still paid heavily for this critical resource.

“Mr Speaker, while animal feeds are exempt from VAT, some of the raw materials used in the manufacture are taxable. This treatment has led to high prices of animal feeds.

In order to make animal feeds affordable to farmers and attract more manufacturers in the sector, I propose to exempt raw materials from payment of VAT,” he told Members of Parliament in the Sh2.3 trillion budget that saw the government dish out millions to the agricultural sector.

The news has been received well by animal feed manufacturers who said the move will promote the dairy farming sector which was slowly going into a sleep mode.

Speaking to Smart Harvest, farm manager for Sigma Feeds Simon Songok said the announcement means the dairy industry will now re-awaken from its slumber. Songok said the high cost of animal feeds was driving farmers away from dairy farming.

Songok charges Sh2,200 for a 70kg dairy meal and Sh2,350 for dairy feeds.

According him, the cost of these animal feeds and many others are set to go down once the VAT is removed from costing of the raw materials.

Cheaper animal feeds

The productivity of the dairy farmers will also improve with the removal of the levies, he added.

“Farmers have been complaining a lot that the cost of animal feed has gone up. If you do some calculation of the cost of producing one litre versus the income then you will realise that the farmers were not making money,” he said noting that the government must have realised the dairy industry was losing farmers to other industries such as pig farming.

He said next week animal feed manufacturers would meet and deliberate on the new prices of their products following the government’s decision. He was confident that all animal feed manufacturers would bring down the price of animal feeds following this gesture from the government.

While the cost of animal feeds as a fraction of the total production feeds varies, it averages 70 per cent, according to Songok.

Some of the raw materials used in the manufacture of animal feeds include cotton cake, sun flower, soya and maize brand.

Meanwhile, sugarcane farmers from Kakamega County have welcomed the gesture by government to abolish levies that contribute to high cost of production of the cash crop.

Farmers interviewed said the development came at the right time.

“It is the first time such a bold move has been taken and this means a lot to all sugarcane farmers across the country,” said William Kopi, one of sugarcane growers from Butali zone.

He said farmers have shouldered the burden for many years and deserve the waiver. According to him, the one per cent Cess deductions on every tonne of cane delivered at the factory for crushing should have been scrapped as well.

“That would have allowed the farmer to earn extra money which then could be ploughed back into expanding area under the crop and increase availability of the crop,” said Kopi.

However, the Kenya National Federation of Sugarcane Farmers warned that it is too early for the farmers to start celebrating.

The Deputy Secretary General Simon Wesechere said the waiver of commodity fund will benefit sugar consumers and not the farmers.

“It is sugar development levy (commodity fund), borne with consumers of sugar that has been done away with, this has no any impact on the farmer,” said Wesechere.

According to him, removal of the consumer tax could impact negatively on production of sugarcane in the long run.

“It is the same levy from which billions of shillings released to struggling sugar factories is sourced to help keep them operational.”

He said farmers have benefited from the same levy particularly when it comes to sugarcane development.

“What the government should have done is to introduce credits to farmers at affordable lending rates as has been the case in the past,” argued Wesechere.

Since sugarcane, unlike maize, is a perennial crop, he said the government must guarantee farmers supply of affordable fertiliser throughout the year.